Estate Planning Please provide little explanation with the answers. ............

Question

Estate Planning

Please provide little explanation with the answers. ...............................................................................................

1- Among the assets in a decedent’s gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. The relevant facts about this estate are as follows:

- Adjusted Gross estate $3,000,000

- Fair market value of stock in the closely held 25,000

corporation

- Administration and funeral expenses 100,000                 

- State inheritance taxes 0

- Federal estate taxes 0

What amount of closely held corporate stock may be redeemed under IRC Sec. 303 so that redemption will be treated as a sale or exchange rather than a dividend distribution?

(A) $0

(B) $70,000

          (C) $130,000

          (D) $200,000

...............................................................................................

2- Which of the following statements concerning estates and trusts is correct?

(A) Both entities come into being by contract.

(B) Both entities are taxed as partnerships.

          (C) Both entities are supervised by the court until termination.

          (D) Both entities may have corporate fiduciaries.

Explanation / Answer

Question 1.

As per under IRC Sec. 303, to qualify for this favorable tax treatment, the deceased must have corporate stock making up 35% or more of their adjusted gross estate. In the present case stock constitutes less than 35%.

Hence answer is A. $0.

Question 2.

Answer: (D)

Corporate fiduciaries are organization, like banks, acting in a position of trust for a person or other organization.

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